In the first half of the year, the domestic recycled PVC market ushered in a rare seller’s market. Demand was relatively strong, and the demand for recycled PVC continued to rise, which changed from the low profile of the past. In the second half of the year, with the easing of supply and demand fundamentals and the return of new food, it is expected that recycled PVC may be retreated from the enthusiasm for price increases, and the probability of stabilizing the narrow market is extremely high.
Compared with other types of recycled plastics, recycled PVC has always been low-key and has little fluctuation. However, looking at the trend of recycled PVC in the first half of 2021 at the end of June, I feel that recycled PVC also has ups and downs, and it has an “excited” impression. According to data from Zhuo Chuang Information, in the first half of 2021, recycled PVC has been rising all the way, and the rise has been solid. As of the end of June, the national standard washing level of white plastic steel was about 4900 yuan/ton, an increase of 700 yuan/ton from the beginning of the year. Compared with the same period last year, it increased by 1,000 yuan/ton. The mixed crushing of small white pipes is about 3800 yuan/ton, an increase of 550 yuan/ton from the beginning of the year, and an increase of 650 yuan/ton from the same period last year. In terms of soft materials, the white transparent yellowing particles are about 6,400 yuan/ton, an increase of 1,200 yuan/ton from the beginning of the year and 1,650 yuan/ton from the same period last year. The broken white curtain material is about 6950 yuan/ton, an increase of 1450 yuan/ton from the beginning of the year, and an increase of 2050 yuan/ton from the same period last year.
Looking at the first half of the year, this wave of rising prices began in March. Due to the traditional Spring Festival in January and February, market popularity was scarce and trading was limited. Both April and May continued their upward trend, and the market maintained in June. Has not changed much.
Analysis of the main reasons for the rise:
Macroeconomics and the periphery: economic recovery and capital promotion
In the first half of 2021, the epidemic situation has been significantly eased compared with the same period last year, and the economic recovery momentum has made great progress compared with the previous period. Countries have released liquidity. For example, the United States continued to increase its loose monetary policy in the first half of the year. On March 6, the U.S. Senate passed an economic stimulus plan of US$1.9 trillion. With the loose monetary policy brought about by sufficient liquidity, the bulk commodities rose as a whole, and the global bulk commodities ushered in a big bull market.
Alternatives: new materials rose to a ten-year high and the price gap between recycled materials widened
After the Spring Festival, many chemicals, plastics and other raw materials, including PVC, rose rapidly after the Spring Festival. It can be seen from Figure 2 that the price of new PVC material in the first half of 2021 was much higher than the same period of previous years. Taking East China as an example, the average price of SG-5 in East China was 8,560 yuan/ton from the beginning of January to June 29, compared with last year. It was 2502 yuan/ton higher in the same period, 1919 yuan/ton higher than last year.
The same is true for the price difference with recycled materials, which is also a record high. For hard materials in North China, the average price difference between new materials and recycled materials in the first half of 2021 is 3,455 yuan/ton, which is 1,829 yuan higher than the same period last year (1626 yuan/ton). /Ton, 1275 yuan/ton higher than last year (2180); in terms of East China soft materials, the average price difference between new and recycled materials in the first half of 2021 will be 2065 yuan/ton, 1329 yuan higher than the same period last year (736 yuan/ton) /Ton, 805 yuan/ton higher than last year (1260).
The high price of new materials and the huge price difference with recycled materials have reduced the downstream acceptance of high-priced new materials, and some have turned to sources of recycled PVC.
Fundamentals: Strong demand, short supply, and high costs have jointly contributed to the market rise in March, April and May
The large price difference between new and old materials caused a surge in demand for recycled materials; after the Spring Festival, the different paces of construction in various regions led to tight supply of goods. After the surge in demand, the shortage of supply has exacerbated the tight supply. In addition, in some areas, such as Jiangsu, the environmental inspection in March caused non-starting work. Stable, local supply is in short supply. In addition, the low and high price of wool goods also supported the rise of the recycled PVC market to a certain extent.
This wave of rise is a comprehensive rise, solid rise, and gradual rise mainly. Almost every specification has faced more than one rise, and the same type of supply in various regions has also shown rises one after another.
In short, strong demand and short supply are the main reasons that support this wave of market. Behind the increase in demand is the shadow of macroeconomics and substitutes.
The rare seller’s market, the influx of new downstream customer demand
The mentality of practitioners is also worth mentioning this year. For recycling manufacturers, it is a rare seller’s market at this stage, especially in March, April, and May. Although they will face tight supply, more inquiries, difficult deployment, and high raw material prices, they are rare sellers’ markets. Recycled PVC continues to advance steadily after digesting the rising trend and still maintain confidence. Some businesses believe that they maintain a wide price gap with new materials and do not need to worry too much about demand issues. The focus is on how to obtain a stable source of raw materials. It has progressed to the second half of the rise. At the end of May, manufacturers continued to actively sell goods, striving for safety.
For downstream, after all, there is still a large price difference between recycled materials and new materials. Therefore, increasing the purchase of recycled materials will help reduce costs. Therefore, many downstream customers actively inquired about recycled PVC in March and April. For regeneration manufacturers, this part is a new customer and its persistence remains to be seen, so the downstream price of this part is maintained at a higher level.
Forecast for the second half of the year:
The strong market in the first half of the year has come to an end, and as the main benefits of the first half of the year have been digested, PVC prices are expected to return rationally, but the fundamentals are still facing factors such as excessive basis, too low absolute value of social inventory, and cost support. exist. There is not much downward space for the market. The specific analysis is as follows:
The main factors affecting the recycled PVC market in the second half of the year are the economic situation, supply and demand, and the trend of new PVC materials.
Economic situation: Internationally, the loose monetary policy in the United States will continue in the second half of the year, but the possibility of continuing to increase is less. With the increase in inflationary pressures, at the latest Fed meeting, the Fed will release the possibility of raising interest rates. It will be advanced to next year’s expectations. Long-term pressure will be placed on commodities, but the loose monetary reality in the second half of 2021 will continue. On the domestic front, my country’s current economic operation is steadily strengthening and improving while maintaining stability. In the face of various constraints such as external variables, financial risks, and economic growth that may appear in the second half of the year, adherence to the “stable leadership” will continue to be the monetary policy to cope with the complex situation. The optimal solution. Overall, the macro-periphery remains a stable and supportive atmosphere for the commodity market.
Supply and demand: current recycled PVC manufacturers’ wool and spot inventories are at a low level. In terms of demand, downstream manufacturers just need to purchase, and the overall supply and demand are in a tight balance. It is expected that this supply and demand situation will continue to be maintained. The weather in July and August is very hot. Conventionally, some manufacturers will choose to reduce the start of work or night production; environmental protection inspections, whether at the provincial or central level, will be more frequent and intense in 2021 than in the same period last year. The region has not yet been announced, so this It will be an uncertain factor affecting the start of construction in the second half of the year. In addition, in the fourth quarter of each year, the prevention and control of air pollution will strictly limit the production of enterprises such as scattered pollution in the region, which will also have a certain degree of impact on production.
New material: The PVC gains in the second half of the year are expected to weaken compared to the first half of the year, but the demand is more resilient, and the supply and demand side will not deteriorate significantly. The depressed demand may return as the price falls behind, while the cost and basis are high Expectations will remain unchanged, which will support the market in the second half of the year. Therefore, it is expected that the PVC market will return to rationality in the second half of the year, and the price center of gravity may fall, but the downward space is temporarily limited.
To sum up, recycled PVC may still face a tight balance between supply and demand in the second half of the year; under the high operation of new materials, the wide spread will also support recycled PVC to a certain extent. Therefore, it is expected that recycled PVC may face big changes in the second half of the year. , Stable and narrow market situation, the downside risk is not big.
Post time: Jul-12-2021